BUY: Grindrod
Grindrod has been under pressure for much of 2025. A hangover from the late-2024 border closures due to political violence in Mozambique saw a fall in port volumes, and a drop in prices of key export bulk commodities weighed on earnings expectations. There has also been selling by large shareholders. The Public Investment Corp dumped 5% at the lows, and the stock slid to R11 in mid-July. All changed with a bumper early-August trading update and results issued on August 22: headline earnings rose 23% to 88.7c a share and a 23c a share dividend was declared. In addition, a 32.2c special dividend was paid. The government also released a positive update on train operating companies using Transnet infrastructure. Grindrod has locomotives and expertise and is pitching to win a key rail corridor, with the market excited for its prospects. The stock leapt on the upbeat narrative. At R15.54, despite the recent rally, there is steam left in the stock given that its pre-Mozambique high was R16.
SELL: RCL Foods
Despite solid results to June 2025, where the benefit of cost efficiencies and margin expansion boosted profitability in the key baking and groceries business, with headline earnings increasing by 28% to 156.3c a share and the dividend rising 71% to 60c a share, RCL has been a lame duck as a food producer stock for nearly two decades. At 960c, the stock is up 1% for the year and is unchanged in 20 years. Restructuring aided the portfolio but earnings have been static over an extended period. Yes, the volatility of chicken has been removed, but sugar, which contributes 40% to profits, has lost some of its sweetness. On an earnings multiple of six, RCL Foods is cheap relative to the sector, but with Remgro owning 80%, liquidity is tight. Management is pulling all the right levers but the economy needs to grow. So no excitement here any time soon.
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